Our Vice President of Sales and Client Development, Barbara Lee, spoke on the “Defining Best Practice in Research Procurement” panel at Unbundling Uncovered London in November 2019. In her post-panel interview with Hamish Risk, editor at Substantive Research, she discusses the biggest research valuation and corporate access trends almost two years after the roll out of MiFID II regulations.
What do your clients see as the biggest trends in this MiFID II world?
I think there are three trends that we’ve seen across interactions with our clients. Reality is prior to MiFID II, and even in the early days of MiFID II, interactions were largely a numbers game. Our data even shows that interactions have gone down 25% since MiFID II came into place. This is largely in line with the FCA budget cuts that were cited [in the panel].
The other piece that is interesting is that Top 20 research providers represent 75% of the interactions in our system. But when you speak with the broker liaisons and folks that are managing the research wallet, they’re not spending 75% of their time with the largest providers. The bulge bracket firms have a larger fixed cost base, or fixed pricing, and in some ways they require less oversight.
With the small providers, every dollar goes a long way. So a lot of these broker liaisons are spending a lot of time diving into the weeds, validating that every single interaction took place, because they want to ensure that those smaller brokers are paid that extra $5,000.
The last piece is corporate access. There was a time when people were concerned about the buy side receiving less corporate access, and the reality is that it’s just funded differently now. We’ve seen corporate access levels drop, Q1 down 13% and Q2 down 7%, and I think it’s largely because the buy side is becoming more sensible and thoughtful with their wallets. They’re not taking the incremental marginal meeting to fill up their schedule. Also, some buy-side firms are going direct to corporate and building out their corporate access teams. So, the meetings are still taking place—they’re just not being facilitated by the broker.
There’s some talk on some of these panels that people are obsessed with metrics and quantity over quality. What’s your view on that? Is there a risk that we over-focus on metrics?
Always a risk. But I have seen that the conversation has shifted from quantity and basic rate cards to a larger conversation around establishing better quality evaluation tools. At some point, all of this discussion around broker vote and interactions is going to normalize. So, whats next?
I think some buy-side firms are going to find themselves behind because one of the unintended consequences of MiFID II is that buy-side firms are not procuring new research providers—they’re maintaining or shrinking their broker lists. Good procurement means you’re proactively looking for new sources, and in the data world that also means implementing those new sources ahead of your competitors in order to generate alpha.
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